TXO Systems: Growth Planning, Funding, and Succession Strategies

This report provides a comprehensive analysis of growth strategies for TXO Systems, a leading supplier of telecom network equipment. It begins by evaluating key considerations for growth opportunities, including competitive advantages using frameworks like Porter's Five Forces and resource-based theory. The report then assesses potential sources of funding, weighing the benefits and drawbacks of each, and designs a detailed business plan for scaling up the business, incorporating financial information and strategic objectives. Furthermore, the report explores exit and succession options for the company, comparing and contrasting different approaches and offering recommendations. Analytical frameworks such as Ansoff's Growth Vector Matrix, BCG Matrix, and PESTLE analysis are applied to demonstrate an understanding of competitive advantages and market dynamics. The report concludes by emphasizing the importance of informed choices in managing risks and rewards associated with growth, highlighting collaboration, innovation, and strategic planning as key drivers for TXO Systems' success. Desklib provides access to similar solved assignments and study tools for students.

PLANNING FOR GROWTH
TXO SYSTEMS

Table of Contents
INTRODUCTION...........................................................................................................................................2
TASK 1..........................................................................................................................................................3
P1 ANALYSING KEY CONSIDERATION FOR EVALUATING GROWTH OPPORTUNITIES AND JUSTIFY THEM
IN REFERENCE TO TXO SYSTEMS.............................................................................................................3
P2 EVALUATING THE OPPORTUNITIES FOR GROWTH APPLYING ANSOFF’S GROWTH VECTOR MATRIX 8
M1 DISCUSSION OF GROWTH OPTIONS USING RANGE OF ANALYTICAL FRAMEWORK TO
DEMONSTRATE THE UNDERSTANDING OF COMPETITIVE ADVANTAGES FOR TXO SYSTEM.................10
TASK 2........................................................................................................................................................13
P3 ASSESSING THE POTENTIAL SOURCES OF FUNDING AVAILABLE TO BUSINESS WITH BENEFITS AND
DRAWBACKS OF EACH SOURCE.............................................................................................................13
M2 EVALUATION OF POTENTIAL SOURCES OF FUNDING AND JUSTIFICATION FOR ADOPTION OF
APPROPRIATE SOURCE OF FUNDING FOR TXO SYSTEM........................................................................15
TASK 3........................................................................................................................................................16
P4 DESIGN A BUSINESS PLAN FOR GROWTH THAT INCLUDES FINANCIAL INFORMATION AND
STRATEGIC OBJECTIVE FOR SCALING UP A BUSINESS............................................................................16
M3 DEVELOP AN APPROPRIATE AND DETAILED BUSINESS PLAN FOR GROWTH AND SECURING
INVESTMENT, SETTING OUT STRATEGIC OBJECTIVES, STRATEGIES AND APPROPRIATE FRAMEWORKS
FOR ACHIEVING OBJECTIVES.................................................................................................................16
TASK 4........................................................................................................................................................21
P5 ASSESS EXIT OR SUCCESSION OPTIONS FOR A SMALL BUSINESS EXPLAINING THE BENEFITS AND
DRAWBACKS OF EACH OPTION.............................................................................................................21
M4 EVALUATE EXIT OR SUCCESSION OPTIONS FOR A SMALL BUSINESS COMPARING AND
CONTRASTING THE OPTIONS AND MAKING VALID RECOMMENDATIONS............................................21
CONCLUSION.............................................................................................................................................24
REFERENCES..............................................................................................................................................25
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INTRODUCTION
Small and Medium Enterprises (SMEs) faces various difficulties in sustaining themselves in this
competitive market. The given study is based on one such SME, TXO Systems which is world’s
leading supplier of new and used multi-vendor telecoms network equipment. The company
would apply various technologies so as to identify factors which would help it in finding
opportunities for achieving significant growth. The study would also analyse the source of
investment finance and the procedures through which TXO tries to attract its customers.
Furthermore, the study would provide importance of making informed choices for
understanding risks and rewards associated with growth.
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TASK 1
P1 ANALYSING KEY CONSIDERATION FOR EVALUATING GROWTH
OPPORTUNITIES AND JUSTIFY THEM IN REFERENCE TO TXO SYSTEMS
SMEs are considered as lifeline of a majority of the economy. In the UK, they are responsible for
providing employment to half of the total employees and add a significant amount of income to
the government revenue. However, there are various problems which hamper its growth and
results in their standstill. These factors are bad management and investments, apathy towards
the employees, economic and competitive shocks (Lanchard, et al. 2011). In order to overcome
such factors, the SMEs such as TXO System have to consider various aspects so as to evaluate
growth opportunities. These aspects are:
I. Competitive Advantage
It could be defined as an advantage which is offered by the company over its competitors by
offering greater value of the products to the consumers as compared to competitor’s offer. It
uses competitive analysis to identify their key competitors so as to access their strength and
weakness and then selecting which competitors to either attack or avoid. To achieve the
competitive advantage TXO Systems has applied theory of resources and capabilities which are
a business strategy which is used in the formulation of company's strategy (BURNS, 2011).
Figure 1: Resource-based Theory for Competitive Advantage
Source: [MOORE, 2014]
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In the resource-based theory, the resources of the company are given major role in accessing
its objectives of achieving higher organisational performance and competitive advantage.
Resources are an important part of a company and if the company use it for its own advantage
wisely, it would be difficult for the competitors to imitate it easily.
There are various competitive strategies which could be utilised by TXO Systems for its own
competitive advantage (BURNS, 2014). One such strategy is Porter Five Force Analysis which
could be explained as follows:
Figure 2: Porter Five Force Analysis
Source: [Dobbs, 2014]
The threat of new entrant:
Two issues must be evaluated for while considering the threat of new entrant. The first issue is
their impact on market and second issue is the barriers faced by them while entering the given
industry. Due to high licence fees, high infrastructure cost, easy accessibility to distribution
channel and low customer switching cost; the threat of new entrant is comparatively low
(Chailan, 2013).
Bargaining Power of Buyers
It analyses competitive advantage as it assesses the lower price of a product of a firm, improved
product quality and efficiency in service. Due to low switching cost, lack of differentiation
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among the products and full information about the product by the buyers makes bargaining
power relatively high.
Bargaining Power of Suppliers
It analyses supplier power of an industry and is relatively low for the company due to
standardisation, lack of differentiation and low switching cost.
The threat of Substitute Product
It focuses on the production of similar services developed by the competitors to hamper the
growth of a company. TXO has low threat due to low-quality substitute product and its low
price.
Industrial Rivalry
As there is less rivalry among the competitors, the threat of industrial rivalry on the company is
low (Scarborough, 2016).
II. Innovation
In order to increase the growth of its business, TXO Services would have to bring innovation in
its manufacturing and promotion of its products and services. It should develop products such
as high-quality optic fibre reflectometer, cloud-based communication channel which would
help the company to have a competitive advantage over its competitors. Furthermore, it could
also utilise the services of various portfolio strategies such as BCG Matrix. Moreover, Diffusion
of Innovation Theory is utilised by the company to explain the idea which has been adopted by
the company is gaining momentum and is diffusing through a specific population (Lanchard, et
al. 2011).
Figure 3: Diffusion of Innovation Theory
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Source: [Moutinho and Phillips, 2018]
This theory helps TXO System to identify various strategies so as to target given consumers such
as:
 Innovators: First to try innovative products
 Early Adopters: First to adopt and utilise innovative services
 Early Majority: They seek evidence and then adopt the innovative product
 Late Majority: Adopt the product, after a majority of them have adopted
 Laggards: Most difficult group to adopt an innovative product
In order to attract the above adopters to utilise the services of the company, it should pass
various criteria such as its relative advantage, compatibility, complexity, triability and
observability.
III. Collaboration
Collaboration is a working practice which allows different groups to work together to achieve
business profits. It is also a key to the future of innovation. They are involved with:
 Motivation
 Awareness
 Reciprocity
 Self-Synchronization
 Engagement and Reflection (Ramanathan, et al. 2018)
There are various benefits associated with collaboration and these are:
Information sharing, knowledge and good practice
 Clarity and Efficiency
 Better Communication
 Increasing the strength of employees
 A building of stronger and united workforce
However, there are various disadvantages associated with it such as:
 Conflict in working styles
 Timing
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Collaboration in the form of merger, acquisition, joint ventures and strategic alliances would
prove to be significant for the growth of SMEs in the following ways:
 Provision of more resources
 Diversification due to increased resources
 Reduction in commercial risk
 Bigger contact pool
 Increase in market share
 Provision of larger and talent base
All these factors would significantly help in the growth of SME and allow them to scale new
heights (Ramanathan, et al. 2018).
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P2 EVALUATING THE OPPORTUNITIES FOR GROWTH APPLYING ANSOFF’S
GROWTH VECTOR MATRIX
In order to identify main routes of growth for TXO System, services of Ansoff Growth Vector
Matrix has been taken into consideration.
Figure 4: Ansoff Growth Vector Matrix
Source: [Dawes, 2018]
Market Penetration
 Enhancement in customer care and online services
 Further development of data networks in other existing networks
 Marketing a balanced portfolio for the company
Product Development
 Introducing new fibre broadband for the provision of varieties of access network
equipment
 Combination of IP routing and switching equipment
Market Development
 Targeting new customers belonging to government services
 Provision of services to remote countries (Moutinho and Phillips, 2018)
Diversification
 Making the product available in cities of different countries
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 Acquire another telecom related business
Risks associated with telecom sector and their mitigation
Telecom Sector related risks Mitigation
A continuous interruption in business activities Building up of specific back-up and resilience
mechanism
Failure in the protection of customer
satisfaction
The inclusion of security-related policies and
regulation
Increased Competition Focusing and monitoring on consumer
perception
Inability to reduce major tax disputes Maintenance of constructive engagement with
the tax authority
(Aithal, 2017)
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M1 DISCUSSION OF GROWTH OPTIONS USING RANGE OF ANALYTICAL
FRAMEWORK TO DEMONSTRATE THE UNDERSTANDING OF COMPETITIVE
ADVANTAGES FOR TXO SYSTEM
In order to understand the competitive advantage utilised by TXO System to enhance its
growth, various frameworks have been utilised to demonstrate it with ease.
Boston Consultancy Group (BCG) Matrix
It is a portfolio planning management which helps in identifying market growth and market
shares as they both serves as a proxy for industrial attractiveness and competitive advantage
respectively.
Figure 5: BCG Matrix
Source: [Harding, 2017]
Growth due to competitive advantage via BCG Matrix
The company has been on the verge of getting tremendous growth as explained by BCG Matrix.
It has been shown that the market share has been increased resulting in the high growth rate of
the company. Now the company could use its competitive advantage to capture the market and
10
STARS
High Market
Share
High Growth Rate
QUESTION MARK
Low Market Share
High Growth Rate
CASH COWS
High Market
Share
Low Growth Rate
Dogs
Low Market Share
Low Growth Rate

creates its monopoly. Furthermore, the company has been utilising the concept of theory of
resource and diffusion of innovation effectively which had resulted in utilising its resources to
increase its growth across the country (Aithal, 2017).
PESTLE Analysis
Figure 6: PESTLE Analysis
Source: [Fozer, et al. 2017]
Political Factors
 Regulation Issues
 A battle for net neutrality
Economic Factors
 Interest Rates
 Inflation
 High cost for building up of towers
Social Factors
 Limited expansion in rural areas
 Accessible to all age groups in urban areas due to internet
Technological Factors
 Using new technologies
 Easy Access to the internet
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